China's services growth accelerates in April

Published Sat, May 3 20144:09 AM EDT

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Growth in China's services sector accelerated slightly in April as new orders held steady, an official survey showed, an encouraging sign of strength in an economy that otherwise faces a cloudy outlook.

The purchasing manufacturing index (PMI) for the services industry edged up to 54.8 last month, the National Bureau of Statistics said on Saturday, up marginally from 54.5 in March.

A reading above 50 in PMI surveys indicates growth on a monthly basis, while a number below that threshold points to a contraction in activity.

The mild improvement in the services sector, which mirrors a marginal gain in the official PMI survey of Chinese factories in April, should be welcomed by investors fretting about the health of the world's second-largest economy.

But the pick-ups in the official PMI surveys for factories and services firms would not be enough to dispel concerns that China's slowing growth engine might cool at a sharper pace faster in coming months.

For one thing, the manufacturing PMI - released on Thursday - showed a sizable and worrying drop in export orders in April, suggesting that foreign demand for Chinese goods remains tepid.[ID:nL3N0NN07B]

Saturday's survey showed services firms in China fared better than factories in April, but not by much.

Although new orders rose on a monthly basis, the pace of growth did not change from last month, leaving the sub-index flat at 50.8. Business confidence in the services industry also stayed unchanged at 61.5.

Steady growth since 2007

An expanding industry that is likely to continue accounting for over half of all jobs in China, the services sector has weathered the country's economic cooldown better than manufacturing, even though growth has slackened.

The official PMI survey has hovered above 50 every month since records started in January 2007, though growth still slumped to a five-year low in January, when the PMI dropped to 53.4.

The Chinese growth engine has lost steam in the past year. It has been squeezed by lacklustre foreign demand for Chinese exports and the government's effort to cut its own investment in a bid to reshape the country's maturing economy.

Economic growth slipped to an 18-month low of 7.4 percent in the first three months of the year, and is forecast to also be 7.4 percent for 2014, compared with the government's growth target of about 7.5 percent.

To prove that China has the mettle to enact painful reforms, Chinese Premier Li Keqiang has repeatedly said that his government would not loosen policy drastically to counter any short-term dips in activity.

And in a break from the past, the government has also turned its economic growth target into one that is flexible, saying it would be comfortable if actual expansion falls slightly short of what is envisioned.

HSBC will release a similar PMI survey for China's services sector on May 7 at 0145 GMT.